Sparks: Roaring Kitty’s back; companies feel the pressure ⚡️

News · 17 May 2024Tiarnán McCartney

Welcome to Sparks, your weekly breakdown of some of the most interesting market news.Here’s what sparked our interest this week:

  • GME, AMC surge — is this 2021?
  • The corporate impact of boycotts and protests
  • S&P 500, NASDAQ reach new record highs

We’re so back 🍿

Meme stock traders are at it again, igniting surges in shares of old favourites like GameStop Corp. and AMC Entertainment Holdings Inc. early this week. As of 15 May 2024, Gamestop is now up more than 120% this year so far, while AMC has made gains of almost 120% in the past month.

In case you weren’t around three years ago (or you were living under a rock): meme stocks are stocks of companies whose prices skyrocket due to speculation on social media rather than solid financial health — they're fuelled by online hype rather than traditional market factors.

The resurgence of this meme stock phenomenon seems to have something to do with the return of Keith Gill — better known as Roaring Kitty — to social media. Gill, who played a pivotal role (there’s even a movie about it) in rallying day traders on Reddit back in 2021 to squeeze GameStop short sellers, reappeared mysteriously online recently…

And it wasn’t just GameStop and AMC having a moment:

  • Virgin Galactic: a key player in space tourism, Virgin Galactic surged over 33% on Tuesday morning as it joined the meme stock rally. Despite its recent gains, the company founded by Richard Branson is still down quite a bit from its previous highs.
  • Blackberry: once a business type’s best friend (before yielding ground to competitors like Apple), Blackberry witnessed a 14% jump on Tuesday morning. The company now focuses on providing endpoint security software and Internet of Things (IoT) management solutions.
  • Koss: a headphone manufacturer that rode the meme stock wave in 2021, Koss rallied by 35% on Tuesday morning.
  • SunPower: a heavily shorted stock, SunPower saw its shares leap by 19.6% on Monday, followed by a 62% surge on Tuesday morning.

Roaring Kitty’s remarkable reappearance took the form of a popular meme featuring a man leaning forward in his chair, clutching a video game controller. Gill didn't include a caption or any other context — sparking speculation about his intentions.

Gil has since posted dozens of memes referencing reckonings and requels — who knows how many lives this cat’s got.

But hold on a moment… The meme stock saga emphasises the importance of understanding risk. Investing inherently involves risk, but some ventures are more akin to spinning a wheel in Vegas than actual sound investing. While the thrill of the gamble is appealing to some, those that bought in at heightened levels can face steep financial losses when the market eventually (and inevitably) regains rationality.

The numbers

  • More than $11 billion — The amount GameStop has seen its market value swell‌ this month alone, while AMC has added $1.2 billion to its market capitalisation
  • Around $1.24 billion — The amount GameStop short sellers have lost in May 2024 alone, according to data from S3 Partners
  • More than 26 million — The number of views on Roaring Kitty’s on Roaring Kitty’s inaugural post following his return, at the time of writing

Feelin’ the heat 😰

Pro-Palestinian movements are piling on the pressure.

As campus protests and occupations sweep across the US and Europe, and as Israel's widely condemned incursion on Rafah persists, pro-Palestinian movements are increasingly directing their energy towards corporate targets they view as complicit or involved in Israel's alleged genocide against the people of Gaza.

The current conflict, which escalated with Hamas militants' attacks on southern Israel in October 2023, has led to devastating consequences, with casualties on both sides and significant civilian suffering. Amidst this carnage, pro-Palestinian activists are mobilising globally to demand accountability and action against what they view as unjust aggression and human rights violations.

  • Google developer conference: demonstrators disrupted Google's developer conference this week, demanding an end to the tech giant's collaboration with the Israeli government. The group, calling themselves No Tech for Genocide, demands Google end its cloud computing contract with the Israeli government — Project Nimbus. They allege that Google's technology helps Israeli military surveillance in Gaza, leading to the arrest and detention of Palestinians.
  • Barclays AGM: last week, Barclays faced a tense annual shareholder meeting as activists accused the bank of prioritising “profit over people and planet” and highlighted one of Britain’s biggest banks’ ties to defence firms involved in Gaza.
  • Cola alternative: Palestinian-Swedish beverage company, Palestine Drinks, saw a surge in demand for its alternative to Coca-Cola and Pepsireflecting consumer boycotts of US brands perceived as supportive of Israel.

These actions occur against the backdrop of a broader Boycott, Divestment, and Sanctions (BDS) movement, which aims to pressure Israel to comply with international law and respect Palestinian rights. Here's the deal with BDS:

  • BDS movementlaunched in 2005, the BDS movement calls for various forms of boycotts, divestments, and sanctions against Israel until specific demands are met, including an end to the occupation of Palestinian territories and recognition of Palestinian rights.
  • Corporate acknowledgment: multinational corporations and brands like StarbucksMcDonald’sBurger King, Coca-Cola, KFC, and Pizza Hut have already acknowledged the impact of boycott campaigns on their bottom lines, signalling a shift in consumer behaviour and consumption patterns.

Israel’s war on Gaza has once again underscored the intersection of geopolitics and corporate interests. Just as the invasion of Ukraine led several Western multinationals to withdraw from Russia, the ongoing conflict in the Middle East is reshaping business dynamics and prompting a reevaluation of corporate stances on contentious geopolitical issues.

In other news 🤓

Some other sparks that have been flying this week:

  • OpenAI’s ‘Her’ era — A day after OpenAI showcased its ChatGPT chatbot’s upgraded capabilities (the film Her, anyone?), the company faced another plot twist. Ilya Sutskever, the company’s co-founder and chief scientist, announced his departure from the company — just months after he and three other board members attempted to force the startup's high-profile CEO, Sam Altman, out of his position. The development is the latest governance drama at a company (backed by Microsoft) with its hands on some pretty advanced (and honestly, kind of creepy) technology. There’s never a dull moment.
  • On the up (not) — Things just keep getting better and better for Boeing — said no one. The Department of Justice dropped a bombshell on Tuesday, revealing that Boeing has fallen short of a 2021 settlement agreement linked to issues surrounding its troubled 737 Max model, infamous for two fatal crashes in 2018 and 2019. In a scathing letter to a federal judge, the department highlighted Boeing's failure to establish a robust compliance and ethics programme, a key condition of the settlement. This latest revelation could pave the way for criminal prosecution. The timing couldn’t be better for Boeing, a company in the midst of scandal and scrutiny since a door panel blew out of a 737 Max 9 plane during an Alaska Airlines flight in January. As of 15 May 2024, Boeing’s stock is down almost 30% this year so far.
  • Making history — The S&P 500 hit a new record high ‌this week, fuelled by some positive news on the inflation front. Investors welcomed a report indicating that inflation in April 2024 was softer than anticipated, sparking optimism for potential lower interest rates‌ — ‌‌a pretty favourable scenario for stocks. The S&P climbed as much as 0.6% to reach 5,279.26 shortly after the market opened, marking its first intraday high since 28 March 2024. Meanwhile, the Nasdaq Composite — dominated by tech stocks — ‌also reached a new all-time high with a 0.7% increase, surpassing its previous record, also set in March. The Dow Jones Industrial Average rose by 160 points, or 0.4%, inching close to its March 2024 record price.

Next week 🗓️

Earnings reports are expected from Nvidia and Target Corp.

That’s all for this week!

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